Homeowners in peril have their own problems. They have chosen, however unwisely, to put their future earning capabilities and monetary security at risk. They have a legally enforceable contract, which they signed of their own free will (albeit subject to some selective blindness), which binds them to repay a given sum of money according to an agreed set of terms. The biggest problem, is variations in the rate of the interest on the unpaid balance. They signed on perhaps an “interest only” or “below market rate” interest bearing loan, and did not realize what “amortization” really means. The effect is, that on any amortized loan, the initial payment is mostly payment on interest, with only a very small amount going to reduce the principal of the original loan. So even after a year, or two or three, most of the original debt still exists.
There is a way to beat this. Determine how much the principal is being reduced each month, then pay two or three times that much in addition to the agreed monthly payment. This one act alone can reduce the loan repayment by literally years.
And do not fret about the lender going “broke”, as the obligation is often no longer held by the original lender anyway, though they may be acting as the servicing agent. And even if they still hold the paper, all these insturments are passed to the hands of a court-appointed receiver, as “successors and assigns”.
If you fail to pay regard (and the agreed monthly payment), the “successors and assigns” are in a well-established position to pursue you for the remaining debt, unless satisfactorily discharged in some manner.
OF course if one can barely afford the payment as it is...then this is impossible.
Many of these homeowner were pushed into these loans at the advice of licensed professionals and many had no idea what they were getting into. When questined n=by the borrower the typical response was, ‘Ah, Don’t worry, this is a band aid loan and in 2 years we’ll refinance you out of this terrible loam into a brand new 30 year fixed loan. All will be fines, just sign here, so I can make $20,000 in rebates and fees because this loan is better for me and not really you because I get paid more to sell you this loan!” Yes, that is how it works most of the time.
I have been in the mortgage, real estate and loss mitigation industry for years and I UNDERSTAND how this all works from the inside and what is GOING NOW with defaulting borrowers.
Plain and simple, they CANNOT refinance out of these ARM/s and that’s the MAIN contribution to the housing and foreclosure crisis. It’s not the media hyping things, it’s reality.
Where we are is the result of TERRIBLE lending practices and that is the ONLY reason. I’m so sick and tired of hearing comments from people who are not, have not been or are not on the front lines of WHAT REALLY is going on out there in the market.
If lender don’t offer loan modifications of these toxic mortgages then it will cause our country to go into a deep, deep recession like we have never seen.